Beige Book: Economy Expands Moderately Across All Districts

According to the Federal Reserve’s recently released Beige Book, economic activity has expanded since the previous report, with all twelve Districts characterizing the pace of growth as either modest or moderate.

Highlights include:

Manufacturing

Reports of manufacturing activity were mixed overall, with six Districts growing since the last Beige Book, three Districts contracting and two Districts reporting little or no change. Firms in the Boston and Chicago Districts reported continued expansion of activity at modest and moderate rates of growth, respectively. Overall activity once again appeared to expand in the San Francisco District, although it was mixed across sectors. Gains in the aerospace and chemical sectors contributed to growth in the Boston and San Francisco Districts, as well as in the Dallas District. Manufacturing in the Chicago District grew with contributions from the auto and housing-related sectors. Manufacturing continued to expand, but at a more modest pace, in the Richmond District. Several firms cited falling export demand, especially from Europe.

Banking & Financial Services

Overall, loan demand was largely unchanged in the Philadelphia, Cleveland, Richmond, Kansas City and San Francisco Districts, with most of these Districts reporting a continuation of slight to moderate growth in total volume. The New York, Atlanta, Chicago and Dallas Districts reported stronger demand than previously, while the St. Louis District reported a slight decline. Some increased lending in Philadelphia, Chicago and Dallas was driven by businesses taking out loans for special year-end purposes such as tax planning and dividend payments. Cleveland, Atlanta, Chicago, Dallas and San Francisco all reported strong auto lending.

Banks in the New York, Philadelphia, Cleveland, Chicago, Kansas City and San Francisco Districts reported improvements in asset quality. Lenders were described as competing aggressively for highly qualified borrowers in Philadelphia, Richmond, Atlanta and San Francisco. In Atlanta, this stiff competition may be leading to loosening credit standards, as there was some indication that banks were more willing to increase their tolerance for risk. Chicago banks also reported some loosening of standards. On the other hand, lending standards remained largely unchanged in New York, Cleveland and Kansas City.